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2.03.2006

Health Savings Accounts - 2006 rules

On Jan. 31 the Congressional Research Service (CRS) published an overview of current rules for Health Savings Accounts (HSAs). (See earlier FR post here.) The publication summarizes the principal rules governing HSAs, such as eligibility, qualifying health insurance, contributions, and withdrawals.

An HSA is a tax-exempt account for paying qualified medical expenses not covered by insurance. HSAs were established in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, PL 108-173, Title XII, 117 Stat. 2469 (pdf, 1MB, 416p., from GPO).

As explained in the CRS report, HSAs may be established with banks, insurance companies, or other entities approved by the Internal Revenue Service (IRS) to hold Individual Retirement Accounts (IRAs) or Medical Savings Accounts (MSAs). Insurance companies that offer high deductible health plans (HDHPs) may also establish HSAs for their policyholders. HSAs do not need state approval but individuals cannot have HSAs without an HDHP, and states may require all insurance to include benefits with no or low deductibles. Health Savings Accounts: Overview of Rules for 2006, CRS report, RL33257(pdf, 64KB, 14p., from Open CRS)